Mercury Systems Q4 Earnings Call Highlights

Mercury Systems reported record fourth-quarter bookings, backlog and revenue for fiscal 2026, as the defense technology company cited broad demand across its portfolio and raised its long-term organic-growth target. Chairman and Chief Executive Officer Bill Ballhaus said fourth-quarter bookings reached $660 million, up 93.1% from a year earlier, producing a book-to-bill ratio of 2.3. The quarter included the company’s largest-ever bookings for its Common Processing Architecture, or CPA, products, along with production awards in effectors, airborne applications, space and missile defense. Fiscal-year bookings totaled $1.5 billion, an increase of 49.8% year over year, while total backlog rose 38.4% to more than $1.9 billion. Mercury’s next-12-month backlog reached $1 billion, which Ballhaus said provides greater visibility entering fiscal 2027 and into fiscal 2028. Fourth-quarter revenue was a record nearly $290 million, representing organic growth of 6.1% from the prior-year quarter. Adjusted EBITDA was $49 million, or 16.7% of revenue, compared with $51 million, or 18.8% of revenue, a year earlier. Free cash flow was $29 million, down from $34 million in the prior-year period. GAAP net income for the fourth quarter was about $1 million, or $0.01 per share, compared with $16 million, or $0.27 per share, in the same quarter last year. Adjusted earnings per share were $0.37, down from $0.47. For the full fiscal year, revenue increased 7.9% to $984 million. Gross margin improved 70 basis points to 28.6%, while adjusted EBITDA rose 25.7% to $150 million. Full-year adjusted EBITDA margin expanded 217 basis points to 15.3%. Mercury reported a GAAP net loss of about $30 million, or $0.50 per share, for fiscal 2026, improving from a loss of $38 million, or $0.65 per share, in fiscal 2025. Adjusted earnings per share rose to $1.06 from $0.64. Free cash flow was $68 million, compared with $119 million in the previous fiscal year. Executive Vice President and CFO David Farnsworth said full-year gross-margin improvement was driven primarily by lower manufacturing adjustments and reduced net estimate-at-completion, or EAC, change impacts. Operating expenses rose 2.5% during the year, though they declined by 150 basis points as a percentage of revenue. Ballhaus said Mercury is seeing increased volume on existing production programs and a transition of development programs into production. Domestic revenue, which accounted for about 85.8% of fiscal 2026 revenue, grew organically by 13% year over year. The company said its overtime revenue rose 23.6% in the fourth quarter, reaching its highest level in 15 quarters.